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ACA Penalties & Deadlines for Tax Year 2020

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The IRS issues penalties for employers who do not comply with the Affordable Care Act (ACA) Employer Mandate. For the 2020 tax year, the penalties have increased. What are the ACA penalties? Monetary penalties for filing late If you file ACA forms to the IRS after the deadline, you will be charged a minimum of $50 per return. At maximum, you may be charged $550 per return filed late. The amount increases by the number of returns not filed and the length of time it takes you to file them after the deadline. According to ACA Times, if you file late for tax year 2020, you can expect to pay the following penalty amounts: $50 per return filed late if you file within 30 days of the deadline; the penalty amount will not exceed the annual maximum, $556,500 $110 per return filed late if you file 31 or more days late, but before August 1, 2021; the penalty amount will not exceed the annual maximum, $1,669,500 $270 per return filed late when filed after August 1, 2021; the penalty amount will not exceed the annual maximum, $3,339,000 $550 per return if the IRS believes that you are intentionally disregarding this mandate; the penalty amount for this has no annual maximum  However, if your gross receipts for the past three years are $5 million or less, you would be charged the same penalty amounts with lower annual maximums.  Penalties for failing to comply with the ACA Employer Mandate According to Freeman Law, there are two types of penalties for employers who disregard the ACA Employer Mandate: A. When an applicable large employer (ALE): Does not offer coverage Offers coverage to less than 95% of its full-time employees and their dependents Has at least one full-time employee who receives a premium tax credit to help pay for coverage through a Marketplace Exchange B. When an ALE offers coverage to at least 95% of its full-time employees and their dependents, but at least one full-time employee receives a premium tax credit to …

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2021 Deadline for Forms 1099-MISC and 1099-NEC

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Tax season is around the corner, so it’s time to start gathering information and preparing for the deadlines. What is the 2021 deadline for filing 1099s? The 2021 deadline for Forms 1099-MISC and 1099-NEC is Monday, February 1 since the typical deadline date, January 31, lands on a Sunday. The deadline for Form W-2 is also February 1, 2021. According to CPA Practice Advisor: A 2015 law made it a permanent requirement that employers file copies of their Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31. That is also the date the Forms W-2 are due to workers. This includes Form 1099-NEC and 1099-MISC as it relates to independent contractors and related nonemployees. However, now that nonemployee compensation has been separated from Form 1099-MISC onto Form 1099-NEC, the deadline to e-file Form 1099-MISC is March 31, 2021. What does this mean for your business? Business owners need to file 1099s to the IRS and send pay statements to freelancers, contractors, and other miscellaneous earners by the deadline. This means you will want to start gathering the following information for the independent contractors who have worked for you in 2020: Full name Address Social Security Number or Individual Taxpayer Identification Number Learn more about the latest instructions for Forms 1099-MISC and 1099-NEC from the IRS here. Start your e-filing process with eFile360 E-filing is the quickest and safest way to submit forms, so e-file with eFile360. Create a free account today.  Be sure to utilize our TIN Checking service, which helps you know if you are reporting accurate tax IDs and names. Learn more about our TIN Checking service here. …

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Does Working from Home Change Your Taxes?

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The coronavirus pandemic has created a major shift to freelance and remote work. But what does that mean for your taxes? Freelancing Boom As 2020 wore on, many businesses were forced to let employees go or close altogether in an effort to save themselves from massive losses caused by COVID-19 shutdowns. Two million people in the U.S. have taken up freelancing in the last twelve months, increasing that proportion of the workforce from 28% (where it had hovered steadily for nearly 5 years) to 36%, according to NPR. Freelancing and Taxes As more people head towards freelancing and independent contracting, individuals and businesses who make use of these new avenues and hire them for gigs of all sizes, the amount of 1099 filing, specifically 1099-NEC and 1099-MISC, will increase, too. Rather than send W-2s as you would with an employee, businesses that hire independent contractors will need to prepare a 1099-NEC to report non-employee compensation that totals more than $600 in a year, which includes but is not limited to the wages you are paying the non-employee. Self-Employed vs. Working from Home Employees who are now working from home may feel entitled to tax deductions for the expenses they incur as a result of using their own resources (utilities, office supplies, electronics) to compensate for their loss of office or workspace. But when it comes to taxes, there’s a difference between being self-employed and simply working from home for a larger company. If you are self-employed, running your own business from the comfort of your home, you are and have always been able to deduct home office expenses. Unfortunately, this is not the case for those who work from home and do not own their own business. Does that mean employees are on their own in purchasing the things they need for their new home office? Not necessarily. Employees are encouraged to ask their bosses for stipends to purchase items for their home office. In some cases, employers are …

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5 Common 1098 Questions

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1098s are another subset of forms, much like 1099s, that have small but crucial differences between the different form types. As we approach the end of 2020, tax season will seem closer than ever after the strange circumstances this year brought around for businesses and tax filing. Here are some answers to 5 common 1098 form and filing questions. What is the deadline for filing 1098s? Copy A of the 1098 deadline for filing on paper with the IRS is February 28. If you are filing electronically, the due date is the end of March. Copy B must be provided to the borrower by the end of January. What happens if there are errors on my 1098? The most common errors associated with 1098 filing are: filing the wrong form type, reporting the wrong amount, reporting the wrong TIN or not including one at all, using the wrong year/version of the form, and not using the correct IRS form (you cannot download or copy). If you make an error that you are unable to fix, the best thing to do is contact an accountant or tax professional for help. Once you have the updated information, you need to file a correction for each form that had errors. What are the different types of 1098s and what are they used for? The primary function of 1098 forms is to report payments and contributions you made that have the potential to be deducted from your taxable income. There are seven different 1098 forms: 1098 (mortgage interest statement), 1098-C (contributions of motor vehicles, boats, and airplanes), 1098-E (student loan interest statement), 1098-F (fines, penalties, and other amounts), 1098-MA (mortgage assistance payments), 1098-Q (qualifying longevity annuity contract information), and 1098-T (tuition statement). For a bit more on these forms and what they are used for, take a look at our other blog post. What’s the most common 1098 form? The most common 1098 form is, incidentally, the 1098 itself without any dashes or letters following it. This form is used to report …

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6 Common 1099 Questions

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As the trend towards freelance work continues to grow, more and more people will have to file form 1099, specifically 1099-NEC. Tax filing season will be here before you know it, and we wanted to share 6 common 1099 questions that businesses and individuals alike are asking. What is the deadline for filing 1099s? The deadline for filing 1099s with the IRS and for sending them to the independent contractor recipient is January 31 every year. However, for tax year 2020, the deadline is February 1, because January 31 falls on a Sunday. What happens if there are errors on my 1099? The most common errors associated with 1099 filing are: filing the wrong form type, reporting the wrong amount, reporting the wrong TIN or not including one at all, using the wrong year/version of the form, and not using the correct IRS form (you cannot download or copy). We’ve shared some tips here on how to fix your errors and file a correction. What are the different types of 1099s and what are they used for? There are 18 different 1099 forms: 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-H, 1099-INT, 1099-K, 1099-LTC, 1099-MISC, 1099-NEC, 1099-OID, 1099-PATR, 1099-Q, 1099-R, 1099-SA, and 1099-SB. 1099-NEC and 1099-MISC are two of the most common 1099s. For more information on what the other 1099 forms are used for, check out our blog post on that topic. What’s the difference between 1099-NEC and 1099-MISC? The 1099-MISC is for reporting miscellaneous payments made to independent contractors for things like rent, fishing boat proceeds, royalties, substitute payments, medical/healthcare payments, crop insurance proceeds, gross proceeds paid to a lawyer, and any excess golden parachute payments. It was previously used to report non-employee compensation and wages. Non-employee compensation reporting is now done on the renewed 1099-NEC form – this was reintroduced to separate non-employee expenses and prevent common reporting mistakes. You’ll use a 1099-NEC to …

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Changes for Tax Year 2021

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The IRS has released its updates for the tax year 2021. As 2020 draws to a close, it’s hard to imagine even beginning to think about the tax year 2021, but the IRS has just released 2021 tax rates, standard deduction amounts, and more.  These updates are not for you to use in 2021 on your tax year 2020 filings, but rather the information you’ll be using in 2022 to complete your taxes for the tax year 2021.  Let’s break down some of the updates. Tax Brackets, Rates, and Deductions Forbes has some great infographics that clearly illustrate the tax rates and brackets both for individuals and for married individuals filing jointly. For married individuals filing jointly: 10% - for taxable income up to $19,900 12% - for taxable income between $19,900 and $81,050 22% - for taxable income between $81,050 and $172,750 24% - for taxable income between $172,750 and $329,850 32% - for taxable income between $329,850 and $418,850 35% - for taxable income between $418,850 and $628,300 37% - for taxable income over $628,300 For individual taxpayers: 10% - for taxable income up to $9,950 12% - for taxable income between $9,950 and $40,525 22% - for taxable income between $40,525 and $86,375 24% - for taxable income between $86,375 and $164,925 32% - for taxable income between $164,925 to $209,425 35% - for taxable income between $209,425 to $523,600 37% - for taxable income over $523,600 Along with these brackets and rates, the IRS also announced an increase in the standard deduction of $300 for married couples filing jointly and $150 for individuals for tax year 2021 – bringing that total to $25,100 and $12,550, respectively. The standard deduction for heads of households will also increase by $150. Exemptions For the tax year 2021, the AMT (alternative minimum tax) exemption amounts have been adjusted for inflation. They are as follows:  Individuals: $73,600 Married filing jointly and surviving …

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